Marketing Chapter 9
c
A car buyer can choose a base model at one price, or one with a premium sound and navigation system at a higher price. This is an example of _______ pricing. A. by-product B. product bundle C. optional-product D. product line E. captive-product
discount
A straight reduction in price on purchases during a stated period of time or of larger quantities
c
Gillette charges a fairly low price for its razors (relative to costs) and a high price for razor blades. It is using a strategy of ___________ pricing. A. two-part B. product line C. by-product D. captive-product E. product bundle
C
If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward. Of the following, which is NOT one of the common pricing objectives? A. Supporting resellers and gaining their support B. Customer retention and building profitable customer relationships C. Grabbing international market share D. Preventing competition E. Avoiding government intervention
a
Roshika has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she does not know much about wine, she will likely use the price of the wines as ________. A. an indicator of quality B. a type of segmented pricing C. an indicator of the cost of production D. a limited-time offer E. an indicator of geographic pricing
demand curve
a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged
Cost-plus pricing (markup pricing)
adding a standard markup to the cost of the product
product bundle pricing and examples
combining several products and offering the bundle at a reduced price ex) microsoft office, AT&T
variable costs
costs that vary with production
What sets the ceiling?
no demand above this price customer's perception of the products valued
What is the difference between market penetration and market-skimming pricing?
penetration is setting a low price, skimming is setting a high price
price (broad definition)
the sum of all values that customers give up in order to gain the benefits of having/using the product/service
e
Bath & Body Works uses _____________ pricing when the company offers "three-fer" deals on its products (such as soaps, lotions, and moisturizers). A. product line B. captive-product C. two-part D. by-product E. product bundle
d
Continually adjusting prices to meet the characteristics and needs of individual customers and situations is known as _______________________. A. cash rebates B. promotional pricing C. segmented pricing D. dynamic pricing E. psychological pricing
Fixed costs (overhead)
Costs that do not vary with the quantity of output produced
A
Internal factors that affect pricing include _________________. A. The company's overall marketing strategy, objectives, and marketing mix B. The company's overall marketing strategy, objectives, and the nature of the market C. The company's overall marketing strategy, the nature of the market, and demand D. The nature of the market, demand, and the economy E. The company's overall marketing strategy, objectives, and demand
b
The Ford Mustang is offered in several different models. Ford uses __________ pricing to determine the price steps between the different models. A. two-part B. product line C. product bundle D. optional-product E. captive-product
b
The illegal practice of ______________________ is selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business. A. deceptive pricing B. predatory pricing C. price maintenance D. price-fixing E. price discrimination
e
UPS uses _________________, which charges different prices for shipping depending on an item's destination. The more distant the city where the package is being shipped, the higher the price UPS charges. A. free on board (FOB) origin B. base-point pricing C. freight-absorption pricing D. uniform-delivered pricing E. zone pricing
e
When Apple introduced its iPhone X, it priced the new product at nearly $1,000, considerably higher than competing smart phones. Apple was pursuing a ___________________ new product pricing strategy. A. captive-product B. market-penetration C. optional-product D. by-product E. premium pricing
e
When a retailer temporarily prices a few select items below cost to create excitement and pull consumers into the store, it is practicing ___________________ pricing. A. segmented B. optional-product C. geographical D. psychological E. promotional
dynamic pricing
adjusting prices continually to meet the characteristics and needs of individual customers and situations
pure competition
consists of many buyers and sellers trading in a uniform commodity. No single buyer or seller has much effect on the going market price.
monopolistic competition
consists of many buyers and sellers trading over a range of prices rather than a single market price
total costs
fixed costs + variable costs
Three types of cost:
fixed, variable, total
E
is one major objective associated with a market-penetration pricing strategy. A. Skimming off small but profitable market segments B. Preventing customer dissatisfaction C. Attracting buyers willing to pay a higher price D. Avoiding everyday low pricing E. Winning large market share
seasonal discounts
price reduction to buyers who buy merchandise or services out of season.
Quantity discount
price reduction to buyers who pay their bills promptly
psychological pricing
pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product
cost-based pricing
setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
product line pricing
setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices
price (narrow definition)
the amount of money charged for a product or service
pure monopoly
the market is dominated by one seller. The seller may be a government monopoly, a private regulated monopoly, or a private unregulated monopoly. Pricing is handled differently in each case.
C
Sadie's Restaurant has listened to its customers over the years and is now able to offer the right combination of quality and good service at a fair price. Which pricing strategy is Sadie's using? A. Cost-based pricing B. High-low pricing C. Good-value pricing D. Value-added pricing E. Break-even pricing
B
New, premium movie theaters offer features such as online reserved seating, high-backed leather executive chairs with armrests and footrests, the latest in digital sound, super-wide screens, and other amenities for which they charge a higher price. This is an example of which type of pricing? A. EDLP B. Value-added pricing C. Cost-plus pricing D. High-low pricing E. Breakeven pricing
b
Of the following, which is true about pricing? A. Companies usually are free to charge whatever prices they wish. B. Price competition is a core element of our free-market economy. C. Federal law is the overriding authority on pricing. D. Companies do not need to communicate reasons for price increases to customers. E. Companies have no obligation to consider broader societal pricing concerns.
c
When sellers set prices in conjunction or collaboration with one another, this illegal practice is known as _______________. A. price discrimination B. predatory pricing C. price-fixing D. deceptive pricing E. retail price maintenance
D
Which of the following reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?" A. cost-plus pricing B. EDLP C. target return pricing D. target costing E. value-added pricing
oligopolistic competition
consists of only a few large sellers
What sets the floor?
no profits below this price cost
reference price
prices that buyers carry in their minds and refer to when they look at a given product
promotional allowance
promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way
segmented pricing
selling a product or service at two or more prices, where the difference in prices is not based on differences in costs
Market-skimming pricing (price skimming)
setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales
optional product pricing and examples
the pricing of optional or accessory products along with a main product ex) a car buyer may choose to order a navigation system and premium entertainment system. Refrigerators come with optional ice makers.
functional discount (trade discount)
to trade-channel members who perform certain functions, such as selling, storing, and record keeping.
C
A company has set a low price on a new product it introduced. It wants to maximize its market share and attract a large number of buyers quickly. Which new product pricing strategy should the company use? A. market-skimming pricing B. product bundle pricing C. market-penetration pricing D. captive-product pricing E. psychological pricing
D
A variation of break-even pricing is ____________________, which uses the concept of a break-even chart that shows the total cost and total revenue expected at different sales volume levels. A. Competition-based pricing B. Value-added pricing C. High-low pricing D. Target return pricing E. Everyday low pricing (EDLP)
d
The Robinson-Patman Act seeks to ensure that sellers offer the same price terms to customers at a given level of trade to prevent ______________________. A. price-fixing B. deceptive pricing C. predatory pricing D. price discrimination E. retail price maintenance
e
When a college or university charges more for out-of-state students than in-state students, it is practicing ______________________. A. promotional pricing B. time-based pricing C. product form pricing D. customer-segment pricing E. location-based pricing
market penetration pricing
setting a low price for a new product in order to attract a large number of buyers and a large market share
By-product pricing and examples
setting a price for by-products in order to make the main product's price more competitive ex) cheese makers in wisconsin
captive product pricing and examples
setting a price for products that must be used along with a main product ex) blades for a razor, games for a video-game console, single serve coffee pods, printer cartridges, e-books
Customer value-based pricing (definition and steps) and cost-based pricing
setting price based on buyers' perceptions of value rather than on the seller's cost
b
When, if ever, is price discrimination allowed? A. If the seller is selling via the Internet as its main channel, then it is legal. B. If the seller can prove that its costs are different when selling to different retailers, then it is legal. C. If the seller can prove that its revenue is affected when selling to similar retailers, then it is legal. D. If the seller can prove that it is allowable in certain states and local retailing areas, then it is legal. E. If the seller can substantiate that it is distributing internationally, then it is legal.
B
Which of the following is true regarding the price-demand relationship? A. A demand curve shows the number of units a company will produce in a given time period at different prices that might be charged. B. If demand is elastic, sellers will consider lowering their prices. C. If demand is inelastic, a small change in price will result in a large change in demand. D. Price elasticity measures how responsive price will be to a change in demand. E. Demand and price are directly related long dash—the higher the price, the greater the demand.
E
Which of the following refers to setting prices based on buyers' perception of value rather than on the seller's cost? A. Value-added pricing B. Good-value pricing C. Cost-based pricing D. Cost-plus pricing E. Customer value-based pricing
